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Informist, Wednesday, Dec. 10, 2025

 

NEW DELHI – Asian Development Bank has raised its forecast for India's GDP growth in 2025-26 (Apr-Mar) by 70 basis points to 7.2%, mainly because of higher than expected growth in the September quarter. For FY27, ADB retained its growth forecast of 6.5%.

 

At 8.2%, India's GDP growth in Jul-Sept was the highest in six quarters, driven by strong private consumption and despite muted government consumption. GDP growth averaged 8% in the first half of FY26 but economic activity is projected to slow down. The strong GDP growth print for the September quarter has pushed economists to raise their FY26 growth forecasts to around 7.5%. The Reserve Bank of India last week riased its growth projection to 7.3% from 6.8%. 

 

"Growth is expected to moderate in the second half, as the central government's capital spending eases amid fiscal consolidation efforts, and export growth softens, driven by elevated US tariffs impacting select Indian exports," the development bank said Wednesday in its Asian Development Outlook report. "However, stronger than-expected consumption demand, helped by a robust rural economy, the impact of GST rate cuts, and steady credit growth will support growth."

 

ADB expects domestic industrial demand to be tempered by muted goods exports and strong imports. The services sector will continue to grow strongly in the second half of FY26, helped by robust domestic and external demand, ADB said,

 

A strong growth outcome in the first half of FY26 will result in an unfavorable base effect for the corresponding period of FY27, ADB said. "However, this is likely to be offset by an array of recent measures incentivizing growth, such as enhanced labor market flexibility through a revamp of the labor laws, simplification of GST (goods and services tax), relaxation of import restrictions for selected products, and credit relief and support to exporters affected by US tariffs."

 

The development bank lowered it inflation forecast for India in FY26 to 2.6% from 3.1%. The moderation reflects lower-than-expected food prices due to favourable monsoon conditions and strong monsoon crop output, alongside GST rate cuts in select sectors, ADB said.

 

CPI inflation fell to a record low of 0.25% in October and is expected to stay below the RBI's 4% target for the next few months. The RBI last week cut the FY26 inflation forecast by 60 bps to 2.0%. ADB expects inflation to stay subdued through FY26 but rise in early FY27 as base effects reverse. It projects India's CPI inflation in FY27 at 4.2%.  End

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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